More digital than ever, bank customers are looking for an online, flexible, and personalized experience

Temenos' survey reveals that 88.3% of Brazilians consider themselves fully or predominantly online banking customers. In order to retain and acquire new customers, banks and fintechs must bolster the user experience

The future of banking: digital ecosystems and customer experience
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An increasingly digital, flexible, and personalized banking experience – this is what banks and fintechs will have to deliver to retain their user base and acquire new customers. And we’re not just talking about Generation Z or Millennials. According to research by Temenos, a global banking software company, 88.3% of Brazilians consider themselves a “fully” or “predominantly” online banking customer, and more than a third (35.3%) of customers over the age of 56 describe their banking habits as “100% online.”

“The idea that so-called ‘tie-less’ banking – more flexible, informal, personalized – is an exclusivity of the young people is totally mistaken. In many cases, the older generations in Brazil are adopting mobile and electronic banking faster than the younger ones,” said Victor Pego, BSG leader for Brazil at Temenos.

READ ALSO: For most banking executives, branches will become obsolete in five years

Also, the research showed that customers today are more interested in the advantages of a product and in the UX offered by the institution than in the channel. Discounts on banking services would be the most important individual criteria for new banking clients (36.9%), followed by access to credit (20.6%) and mobile services (18.7%).

Regarding user experience, the online/mobile experience appears to cause less “banking stress” than the in-person/branch experience. According to the survey, more than a quarter of respondents who use banking “entirely” or “predominantly” traditionally (26.8%) admit to feeling stressed when dealing with their banks. This number drops to less than 5% (4.9%) for respondents who “always” or “often” bank online.

READ ALSO: The promises of Brazilian open banking: customer empowerment and market opening

Tie-less banking

Pego has pointed out three trends associated with the tie-less banking system: (1) banks will be “invisible,” that is, the traditional branch-based model will become obsolete and the entire banking service structure will be available online; (2) there will be a large volume of wealth transfer, because, according to Temenos research, over the next 25 years the baby boomer generation (those born between the 1940s and 1960s) will transfer approximately $68 trillion to the next generations, which will directly impact consumption and investments; and (3) artificial intelligence solutions will be dominant in the development and offering of banking products and services.

Thus, the bank of the future, according to Temenos, is a bank that is mostly or exclusively online, with a range of products to meet the consumption and investment demands of younger generations, and with AI-based technology. The company estimates that between 1990 and 2020, the banking industry spent $2.1 billion on product, research, and development; between 2021 and 2024, this amount will be $1.1 billion.

READ ALSO: A race to be a financial institution? Not exactly. Fintechs in Brazil follow different paths to grow

Pego believes that there are still many opportunities for innovation in the banking and financial solutions market, also because hypersegmentation is a trend. “We have customers growing in both the retail and corporate markets. Neither area, whether B2B or B2C, shows signs of slowing down, there is still a good market to be explored. We are also watching with interest the rise of super apps. We have seen the success of this model in Asia for a few years now, but here in Latin America it has not yet reached the same success.”

Last but not least, Latin America has a huge unbanked population, a characteristic that should impact business strategies. “There is no surefire strategy, but those who invest in serving the unbanked people will certainly have good results. Players are also emerging that do not identify themselves as banks or fintechs, such as WhatsApp and its payments functionality,” Pego said.

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New priorities: customer experience and marketing

A recent survey by Temenos and The Economist Intelligence Unit showed a dramatic shift in banks’ priorities. According to the report, five years ago, banks were focused on reducing costs and maintaining return on equity for shareholders. Now, in the face of increasingly fierce competition, the focus is on improving customer experience and digital marketing – 81% of executives believe that banks need to offer a differentiated customer experience, rather than products.

But there are differences when looking at each region. While in Europe and North America improving customer experience and engagement is the biggest concern for banks, in regions where digitization and digital inclusion are still lower, other items come first.

This is the case in Latin America. The majority of respondents in the region indicated that promoting customer migration to the digital environment is a priority (42%). Next were improving product agility (38%), digital marketing (26%), modernizing processing systems (22%), and improving customer experience and engagement (20%).

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